After a sudden jump in share prices after the Black Friday sales, the shares of Amazon.com, Inc. (NASDAQ:AMZN) dropped up to 3.73% to $326.00. The investor arm of Moody, Moody’s Corporation (NYSE:MCO), cuts its rating for the online retailer to “Negative” from earlier “stable” rating. The primary reason for the dramatic change in ratings is the issuance of more debt notes from the company.
According to the VP of Moody, Charlie O’Shea, there is no confirmation about the size of these notes but these funds are likely to be used for growth initiatives. He said,
“The change in outlook to negative results from Amazon.com, Inc. (NASDAQ:AMZN)’s announcement this morning that it was issuing a sizeable, though amount to be determined, level of new senior unsecured notes.”
“The negative outlook reflects the impact the new debt will have on interest coverage that is already weak at 1.2 times for the LTM September 2014, as well as debt/EBITDA, which will increase meaningfully as well.”
At the same time Moody’s issued Baa1 senior unsecured rating for the retailer, which is relatively positive primarily because of the strong performance of Amazon.com, Inc. (NASDAQ:AMZN) in the online market.
Moody’s further added,
“While the new debt will further exacerbate Amazon’s already weak interest coverage due to, among other things, the lack of visibility surrounding the cadence for deployment of proceeds, potential areas of future growth and investment utilizing these proceeds, and the timing of potential positive returns, Moody’s believes that the company’s excellent liquidity provides sufficient cushion to affirm the Baa1 rating.”
The online retailer has added up to 15,000 new robots to its warehouses to speedup the packaging process and Amazon.com, Inc. (NASDAQ:AMZN) added up to 80,000 seasonal workers to meet the holiday season demand this year. The shares of Amazon.com have fallen up to 18.25% this year and the retailer has current market cap of $155.89 billion.